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With employment out of the way—for now—onto earnings; Alcoa is scheduled to kick of the 4Q09 earnings season with its report on Monday. Earnings might be stealing most of the show this week, but don’t count out economic data with the release of a critically important retail sales release on Thursday and a torrent of Fed speak prior to the blackout period for the Jan 26-27 FOMC meeting. Speaking of the Fed the market will gain access to the Beige Book on Wednesday, which should continue to indicate marginal upticks in economic activity throughout the fed’s districts. Other important releases include; Thursday’s jobless claims and business inventories; and Friday’s CPI, Empire State Manufacturing Survey, industrial production, and consumer sentiment releases.

Don’t ignore the fed speak. It is my belief that as we move closer to a new fed tightening cycle the first indications of a shift in the Fed’s bias will come through subtle or maybe even not so subtle clues in fed officials numerous public speeches. The next indicator will come in the form of the FOMC minutes, but that is another story for another day. Given the weakness in last week’s employment report I still think we are a ways off from a new tightening cycle—November 2010—, but I am not the one making the decisions, so I recommend listening to Fed officials closely as we move closer to an inevitable move.

Other notable companies reporting earnings next week include Intel (INTC) and JP Morgan (JPM). Next week will also see the opening of the Detroit Auto Show on Monday, where heavy focus is likely to be placed on small and hybrid vehicles. Finally, I wanted to thank everyone who has recently emailed me regarding the usefulness of this piece. Additionally, I invite anyone with any comments or recommendations on how to make the Economic First Look even more useful to please shoot me an email.

Here is the rest of this week’s US calendar:

Monday, Jan. 11

12:40 p.m. EST: Dennis Lockhart, the Atlanta Federal Reserve Bank President, will give a speech on the economy at the Rotary Club of Atlanta.

7:45 a.m. EST: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Last week’s number rose +1.5% compared to an increment of +0.4% a week prior. This week’s release will cover the first full in January.

8:30 a.m. EST: November’s International Trade (Risk: Neutral, Market Reaction: Moderate): I anticipate that November’s trade balance will widen slightly as likely imports rose at a faster pace than exports, due to higher energy import costs. In October, export growth surprised to the upside leading to a marginal contraction in the trade balance. It is usually expected that both exports and imports rise during the start of an economic recovery, while the trade balance widens. The current Bloomberg consensus forecast is for the trade balance to widen to -$35.0bn in November from -$32.9bn in October.

8:55 a.m. EST: Redbook (Risk: Neutral, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales rose 1.6% last week on a yearly basis.

7:00 p.m. EST: Charles Plosser, the Philadelphia Federal Reserve Bank President, will give a speech on the economic outlook at the Entrepreneurs Forum of Greater Philadelphia.

Wednesday, Jan. 13

7:00 a.m. EST: MBA Mortgage Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tend to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Applications rose 0.5% last week after plummeting -22.8% a week prior. Refinance applications fell -1.6%, while purchase applications rose 3.6%. A wave of buyers, filling out multiple mortgage applications, that were looking to take advantage of the first time home buyer tax credit–originally set to expire on Nov. 30th–have already completed their transactions, and have recently reduced the demand for mortgages. However, the recent extension of the first time home buyer tax credit should eventually bring a new set of buyers into the market, which could help support the purchase index over the coming months.

10:30 a.m. EST: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories. Large unanticipated swings in this index could have a significant impact on energy prices. Last week this report showed an increase of 1.3 million barrels versus a drop of -1.5 million barrels a week prior.

2:00 p.m. EST: Beige Book (Risk: Neutral, Market Reaction: Significant): In the Fed’s previous Beige Book all of its districts reported at least modest upticks in growth, and I anticipate this trend will continue in the current release. The report covers the last week in November though the first week of January. The Beige Book is used as an input at the FOMC’s monetary policy meetings, meaning it shouldn’t be ignored by investors.

2:00 p.m. EST: December’s Treasury Budget (Risk: Neutral, Market Reaction: Moderate): December’s treasury budget will almost certainly show a record 15th consecutive month of deficits. In November the monthly deficit totaled -$120.3 billion, bringing the government’s fiscal year to date total deficit up to -$296.7 billion. December’s deficit may get some relief through TARP paybacks, but remain negative. The current Bloomberg consensus forecast is for a deficit in December of -$92.0 billion.

Thursday, Jan. 14

8:30 a.m. EST: December’s Retail Sales (Risk: Neutral, Market Reaction: Significant): After rising 1.3% in November, retails sales should experience its third consecutive month of growth in December. This growth will likely be led by strong vehicle sales during the month, which rose to a pace of 11.2mn vehicles during the month from a pace of 10.9mn units in November. Excluding the auto component, retail sales should show some growth, but at a more moderate rate. Of course any surprise to the upside in this data would be welcomed by the market. The current Bloomberg consensus forecast is for retail sales to rise 0.4% in December, with retail sales ex-auto rising a more moderate 0.2%.

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims rose 1K last week to 434K, after falling 22K a week prior. The four week moving average improved to 450,250 from 460,250. This week’s strong seasonal adjustment factor—the strongest of the year in fact—could have some sway over the weekly report. Improving initial jobless claims are indicative of fewer job losses in the BLS’s monthly employment report; however, the job situation will still get worse before it gets better. The current Bloomberg consensus is for an initial jobless claims reading of 437K on Thursday.

8:30 a.m. EST: Import and Exports Prices (Risk: Neutral, Market Reaction: Marginal): A decline in energy prices during the month and a modest appreciation in the US dollar will likely helped to bring down import prices in December.

9:00 a.m. EST: RBC CASH Index (Risk: Neutral, Market Reaction: Marginal): The Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index is a monthly measure of consumer attitudes toward investing, the economic outlook, and personal finances. This index does hold some importance in so much that it tends to demonstrate a pretty significant correlation with the consumer sentiment index being released on Friday.

10:00 a.m. EST: November’s Business Inventories (Risk: Positive, Market Reaction: Moderate): Marginal attention is typically placed on this release, but this month the business inventories report takes on added significance. Economists use this release to help gauge the impact of the inventory cycle on fourth quarter GDP growth. What this means is economists will be using this data to confirm or alter their fourth quarter 2009 inventory projections, which could sway fourth quarter GDP projections. Many economists—including myself—expect the inventory cycle will play a lead role in the current recovery. It is important to note that the manufacturing and wholesale inventory components of the report have previously been released and rose +0.2% and +1.5%, respectively. Therefore, the report’s retail inventory component—the only unknown figure— is the most important for investors to watch. The current Bloomberg consensus forecast is for a rise in business inventories of 0.2%.

4:30 p.m. EST: Fed Balance Sheet & Money Supply—Current Week’s Release (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. The Fed’s balance sheet shrank marginally last week to US$2.216trn from US$2.219trn. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

Friday, Jan. 15

8:30 a.m. EST: December’s Consumer Price Index (Risk: Neutral, Market Reaction: Significant): Headline consumer prices likely rose in December, albeit at a slightly more moderate pace than the 0.4% rise in November. A bit of warning, on a year over year basis headline CPI will likely rise at the fastest pace in over a year due to extraordinarily low energy prices realized in the fourth quarter of 2008, this pattern will likely continue over the next few months and then normalize as past energy prices play catch-up. Core CPI should remain relatively subdued during the month. The current Bloomberg consensus forecast is for a monthly rise in headline CPI of 0.1%, with Core CPI anticipated to rise at the same pace.

8:30 a.m. EST: January’s Empire State Manufacturing Survey (Risk: Negative, Market Reaction: Significant): This release will be investors first window into the fed’s regional factory sector reports for 2010. Over the prior two months this survey has lost significant ground falling to 2.6 in December from 34.6 in October—a reading over 0 signifies expansion. In December the Richmond fed’s release fell below 0 for the first time in 7 months; ironically, Richmond was the first of the fed’s districts to indicate a marginal recovery. Nevertheless, I do not anticipate the NY fed’s survey will follow suit. The current Bloomberg consensus forecast is for a survey result of 13.0, compared to 2.6 in December. The new orders component remained positive in December, but barely, so I recommend keeping a close eye on December’s number. Additionally, don’t forget to watch the prices paid and employment components of the release.

8:30 a.m. EST: December’s Industrial Production (Risk: Neutral, Market Reaction: Significant): Extremely cold weather across the country should help boost utility output during the month, which should help bolster December’s industrial output. Growth in the manufacturing component should be relatively restrained during the month as aggregate hours worked in manufacturing fell -0.4% during December. The current Bloomberg consensus forecast is for an increment in industrial production of 0.6%, compared to 0.8% a month prior. The same forecast anticipates capacity utilization to rise to 71.9% from 71.3% in November.

9:55 a.m. EST: Preliminary January Consumer Sentiment (Risk: Neutral, Market Reaction: Significant): I expect this index will be up marginally from its final reading of 72.5, on the back of early indications of improvements in the labor market, and incentives around the holiday season. But, these positive factors will be playing a tug-of-war against negative factors including energy prices and what, despite improvements, is a weak labor market. The current Bloomberg consensus forecast is for a reading of 74.0.

This week is relatively quiet on the economic front, following last week’s tsunami of data culminating in a much better than anticipated employment release. This week’s theme is the consumers, who have the potential to stymie last week’s positive sentiment depending on sales strength during the Black Friday shopping weekend. The week’s primary release will be retail sales on Friday; however, the Tuesday’s typically overlooked Redbook and ICSC-Goldman Store Sales releases could provide some important clues toward Friday’s critical sales report. Early indications have been mixed, with discount stores seeming to be more robust relative to their department and specialty store counterparts—another indication of a more value oriented consumer.

After Friday’s employment report investors will be paying close attention to Thursday’s jobless claims data hoping for additional evidence that Friday’s much better than anticipated employment report was not a one-off event. Personally, I still believe the employment situation will get worse before it gets better, but is unquestionably heading in the right direction. Other important indicators this week include Thursday’s international trade data and Treasury budget; and Friday’s preliminary consumer sentiment index and business inventories report.

We should also hear earnings this week from Costco Wholesale Corp., H&R Block Inc., Kroger, and Smithfield Foods. Additionally, during a speech on the economy on Tuesday President Obama could discuss new proposals for job creation derived from his recent jobs summit.

3:00 p.m. EST: October’s Consumer Credit (Risk: Neutral, Market Reaction: Moderate): Total outstanding consumer credit will likely decline for the 8th consecutive month—a series record—after declining by -$14.8 billion in September. The decline should come entirely from a decline in revolving credit—credit cards—while non-revolving credit should show a modest increment due to auto sales. The current Bloomberg consensus forecast is for a total decline in credit of -$9.3 billion for October. This data would be more significant if retail sales and personal sales data were not already known for the month.

7:45 a.m. EST: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number declined -0.1% compared to no change a week prior.

8:55 a.m. EST: Redbook (Risk: Neutral, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales rose 3.8% last week on a year over year basis.

7:00 a.m. EST: MBA Mortgage Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Applications rose 2.1% last week after dropping 5.5% a week prior. Refinance applications climbed 1.7%, while purchase applications rose 4.1% on the back of attractive interest rates. A wave of buyers, filling out multiple mortgage applications, that were looking to take advantage of the first time home buyer tax credit–originally set to expire on Nov. 30th–have already completed their transactions, and have recently reduced the demand for mortgages. However, the recent extension of the first time home buyer tax credit should eventually bring a new set of buyers into the market, which could help support the purchase index over the coming months.

10:00 a.m. EST: Wholesale Trade (Risk: Neutral, Market Reaction: Marginal): This indicator measure the level of inventories and sales by US wholesalers. It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales. It is important to note that this data is on a two month lag.

10:30 a.m. EST: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories. Large unanticipated swings in this index could have a significant impact on energy prices. Last week this report showed an increment of 2.1 million barrels versus a jump of 1.0 million barrels a week prior.

Thursday, Dec. 10

8:30 a.m. EST: October’s International Trade Data (Risk: Neutral, Market Reaction: Moderate): The US trade deficit likely grew further in October on the back of an increment in imports, offset by a smaller increment in exports. It is not unusual for the trade gap to widen during a recovery period. However, the current Bloomberg consensus forecast is for a little changed trade deficit in October of $36.4 billion, compared to $36.5 billion in September.

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell 5K last week to 457K, after falling 35K a week prior. This is the lowest level reading since September 2008. But, a portion of this improvement could be attributable to strong seasonal adjustment factors due to annual deviations in the date of the Thanksgiving holiday, but there is no doubt the news is getting better. Improving initial claims are indicative of fewer job losses in the monthly employment report; however, the job situation will get worse before it gets better. The current Bloomberg consensus forecast is expecting claims to come in at 460K, an increase of 3K from last week.

9:00 a.m. EST: RBC Cash Index (Risk: Neutral, Market Reaction: Moderate): The Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index is a monthly measure of consumer attitudes toward investing, the economic outlook, and personal finances. This index does hold some importance in so much that it tends to demonstrate a pretty significant correlation with the consumer sentiment index being released next week.

2:00 p.m. EST: November’s Treasury Budget (Risk: Neutral, Market Reaction: Moderate): The Treasury Budget in November will likely show another record deficit. In October—the first month of the government’s fiscal year—the deficit reached -$176.4 billion compared to -$155.5 billion a year prior. The current Bloomberg consensus forecast for November is a deficit of -$135.0 billion, to help put this into perspective the average deficit over the past 10 years in November is -$68.4 billion.

4:30 p.m. EST: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. The Fed’s balance sheet shrank last week to US$2.183trn from US$2.189trn. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

Friday, Dec. 11

8:30 a.m. EST: November’s Retail Sales (Risk: Neutral, Market Reaction: Significant): Several factors should help bolster retail sales in November including higher auto sales, new video game releases—Modern Warfare 2—, and higher gasoline prices. However, early indicators toward consumer sales during the popular Black Friday weekend have been mixed. It would appear discount stores sales continue to outperform their department and specialty store counterparts. Look toward Tuesday’s Redbook and ICSC-Goldman Store Sales for additional clues toward this release. The current Bloomberg consensus forecast is for an increase in headline retail sales of 0.9% versus 1.4% a month prior, while retail sales ex-autos is expected to rise 0.5%, compared to 0.2% in October. This would be te fourth consecutive month of growth for retail sales ex-autos.

8:30 a.m. EST: November’s Import and Export Prices (Risk: Neutral, Market Reaction: Marginal): The rising cost of oil in November will undoubtedly place upward pressure on the import price index. Lower natural gas prices during the month will help to offset some increments in other imported commodities including gold and copper, but the ex-petroleum price index should still remain positive.

9:55 a.m. EST: Preliminary December Consumer Sentiment (Risk: Positive, Market Reaction: Moderate): December’s preliminary consumer sentiment should show at least a modest gain from November’s final reading of 67.4. For hints toward the direction of this indicator look at Tuesday’s IBD/TIPP Economic Optimism Index and ABC News consumer comfort index released Tuesday evening. The current Bloomberg consensus is for a reading of 68.2 compared to 67.4 in November.

10:00 a.m. EST: October’s Business Inventories (Risk: Positive, Market Reaction: Moderate): The current Bloomberg consensus forecast is for a decline in inventories of -0.2% compared to a drop of -0.4% a month prior. Despite the consensus forecast, factory inventories, which rose +0.4% in October, realizing its first gain in 14 months, providing some upward momentum for the release. Concurrently wholesale inventories are anticipated to fall -0.4%—released on Wednesday—, while retail trade is expected to decline by -0.1%

September’s trade deficit widened more than anticipated to -US$36.5B from a revised -US$30.8bn in August (originally -US$30.7bn). Exports rose by +2.9% to US$132.0B, while imports were up a more significant +5.8% to US$168.4B–with auto imports rising a substantial US$1.4bn. It is not at all unusual for the trade deficit to widen during the early stages of an economic recovery. But, the wider than anticipated trade gap could place some downward pressure on third quarter GDP growth, which according to the advance release was estimated at 3.5%. The data presently available would indicate a growth rate of closer to 3.0%. At the same time, stronger US exports should help bolster the domestic manufacturing sector.

Based on last week’s negative performance on the back of several pieces of melancholy economic news, some investors may argue September has come late this year. Looking ahead, we have a pretty quiet week on the data front, which may cause investors, still trying to heal from last week’s wounds, to place added emphasis on second tier indicators. This week’s most important releases will be non-manufacturing ISM on Monday, consumer credit on Wednesday, chain store sales and jobless claims on Thursday, and international trade on Friday. Over the coming weeks investors will continue gauging the magnitude of the pullback on the overall economy stemming from the cessation of ‘Cash for Clunkers’, along with potential damages from the upcoming expiration of the first time home buyer tax credit.

This week also brings with it the start of 3Q09 earnings, with Alcoa, Pepsi, Costco, and Yum all scheduled to announce this week. Also this week the Senate Finance Committee is expected to vote on the Baucus Bill for healthcare reform.

Over this weekend G7 finance ministers and central bankers are meeting, and will likely release a communiqué that has the potential to generate some headlines. This will be followed up by IMF/World Bank meetings in Turkey on Tuesday and Wednesday.

Here is the rest of this week’s US calendar:

Monday October 5th:

10:00AM: ISM Non-Manufacturing (Risk: Neutral, Market Reaction: Significant): The non-manufacturing ISM should continue its upward momentum, potentially moving above the 50 breakeven point with a Bloomberg consensus forecast of 50.0 compared to 48.4 in August. But, August’s new orders index of 49.9 should decrease the odds of any large jump in the headline number. This month it will be important to pay close attention to the forward looking new orders index and the prices paid components. Additionally, given the lack of data this week and last week’s negative surprises more emphasis than usually may be placed on this release as the market continues to search for the light at the end of the tunnel.

Tuesday October 6th:

7:45AM: ICSC-Goldman Store Sales (Risk: Negative, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number indicated a weekly increment of 0.1% in store sales compared to a decline of -2.0% a week prior.

8:55AM: Redbook(Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales were down -2.2% last week on a year over year basis.

9:45AM: Thomas Hoenig, Kansas City Federal Reserve Bank President, is giving a speech at an economic forum sponsored by the bank’s Denver branch.

Wednesday October 7th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Last week’s data showed a decline of 2.8% despite lower mortgage rates. The refinance index fell 0.8%, while the purchase index dropped 6.2%.Refinances made up 65.3% of all applications last week.

10:30AM: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories. Large unanticipated swings in this index could have a significant impact on energy prices. Last week this report showed a rise of 2.8mn barrels versus a rise of 2.8mn barrels a week prior.

3:00PM: Consumer Credit (Risk: Neutral, Market Reaction: Moderate): August consumer credit should once again show a significant decline due to bank’s unwillingness to lend and apprehensive consumers’ hesitations toward borrowing. The current Bloomberg consensus forecast is for a decline in credit of –US$8.5bn, versus –US$21.6bn in July. This would be the 7th consecutive month of declines for the index. The chances of a consumer led recovery seem even more remote when you take into account for the dwindling consumer credit market.

Thursday October 8th:

Chain Store Sales (Risk: Neutral, Market Reaction: Significant): Same store sales may have improved slightly in September from August. We should continue to see discount chains outperforming luxury chains as consumers become increasingly budget conscious. It is important to note that Wal-Mart is no longer included in this reelase.

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims rose last week by 17K to 551K. Initial claims should demonstrate marginal improvements over the coming months as weakness in the labor market slowly abates. But, make no mistake about it these levels are still uncomfortably high, and will continue to adversely impact the US payroll data for some time. In fact using a simple regression analysis claims at their current levels would indicate a decline in payrolls of roughly 480K, however, recently this model has been exaggerating the actual effect on payrolls, but nevertheless is a cause for concern going forward. The current Bloomberg consensus for this week’s initial claims release is 540K. But, initial claims could face some upward pressure during the month as an increased number of lay-offs were announced to take place.

10:00AM: RBC Cash Index (Risk: Neutral, Market Reaction: Marginal): The Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index is a monthly measure of consumer attitudes toward investing, the economic outlook, and personal finances. This index does hold some importance in so much that it tends to demonstrate a pretty significant correlation with the consumer sentiment index being released next week.

10:00AM: Wholesale Trade (Risk: Neutral, Market Reaction: Moderate): This indicator measure the level of inventories and sales by US wholesalers. It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales. However, continued weakness in the labor market coupled with no indication of a rebound in consumer spending this index could face some negative pressure. It is also important to note that this data is on a two month lag.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. The Fed’s balance sheet declined last week to US$2.123trn from US$2.141trn a week prior. This was the first decline in eight weeks. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

8:45PM: Thomas Hoenig, Kansas City Federal Reserve Bank President, is giving a speech at an economic forum sponsored by the bank’s Oklahoma City branch.

Friday October 9th:

8:30AM: International Trade(Risk: Neutral, Market Reaction: Moderate): Higher energy import prices will likely lead to further deterioration of the US trade balance with the Bloomberg consensus forecast projecting a decline of –US$33.0bn for August, compared to –US$32.0bn a month prior. It will be important to monitor the levels of US exports, as a weakening US$ could have helped increase international demand for US products. Also, during this time of year imports would typically experience some increments due to retailers stocking up for the holiday season, however, given depressed consumer demand and a morose outlook for the holiday season this effect will likely remain subdued.

With the shortened week comes a rather light economic calendar, with the most significant release likely being the Fed’s Beige Book on Wednesday, followed by consumer sentiment on Friday. This week’s lull will come to an abrupt end next week with the release of the retails sales and Industrial production data, among others. In addition to the Fed’s Beige Book this week brings with it a relatively full schedule of Fed talk, with three members speaking between Wednesday and Thursday on various topics. Other notable releases include July’s international trade data and jobless claims on Thursday. Initial claims will continue to come under the spotlight as last week’s employment report sent investors mixed messages with payrolls coming in better than forecasted, while the unemployment rate disappointed expectations. The market will also hear earnings announcements from a handful of companies, including Campbell Soup Co. (CPB) and Men’s Warehouse (MW). Here is the rest of this week’s calendar:

Monday September 7th:

Labor Day- No Releases

Tuesday September 8th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downward, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number indicated a decline of -0.5% in store sales compared to an increment of 0.6% a week prior.

8:55AM: Redbook (Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales were down 4.1% last week on a year over year basis.

3:00PM: July Consumer Credit Outstanding (Risk: Neutral, Market Reaction: Marginal): The amount of consumer credit outstanding in July likely contracted, but albeit at a slower pace than the month prior due to upward momentum from auto sales stemming from the government’s ‘Cash for Clunkers’ program. Given tight credit conditions and the consumer’s apprehension toward borrowing the index’s revolving credit component should remain suppressed after falling -US$5.4bn in June. This index does not included mortgages or any loans backed by real estate. The current Bloomberg consensus forecast is for an overall drop in credit of around –US$ 4.0bn, compared to June’s net drop of -US$10.3bn.

US Congress Returns from August Break: Upcoming topics that will likely create headlines include; healthcare reform, financial regulation reform, additional increments to the US debt limit, and the reconfirmation of Chairman Bernanke.

Wednesday September 9th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Last week the overall index declined for the first time in five weeks, falling 2.2%. The refinance index declined 3.1%, while the purchase index fell 1.0%; this performance came despite falling mortgage rates and relatively low home prices.

2:00PM: Beige Book (Risk: Upside, Market Reaction: Significant): This report, which is released two weeks before FOMC meetings, outlines economic conditions across the Fed’s 12 districts. Recently the report, which has been negative for all of the year, may have reached an inflection point in July; continued signs of improvement would be a welcome sign to investors. This report helps to provide valuable input into the US service sector, which makes-up roughly 55% of the US economy.

Fed Speak: Charles Evans,Chicago Fed President, is schedule to speak at the Council of Foreign Relations in NY on the “Great Inflation Debate”.

OPEC is scheduled to meet on Wednesday, but is expected to make no changes to its current output policy.

Thursday September 10th:

8:30AM: July International Trade Data (Risk: Neutral, Market Reaction: Moderate): Due to the offsetting effect of a marginal decline in petroleum imports, stemming from pricing effects, July’s overall trade deficit should only show a marginal increment. The current Bloomberg consensus forecast for July’s deficit is US$28.0bn, versus June’s deficit of US$27.0bn

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell last week by 4K to 570K. Claims should demonstrate marginal improvements over the coming months as weakness in the labor market slowly abates. But, make no mistake about it these levels are still uncomfortably high, and will continue to adversely impact the US payroll data for some time. The current Bloomberg consensus for this week’s initial claims number is 565K. In fact using a simple regression analysis claims at their current levels would indicate a decline in payrolls of roughly 500K, however, recently this model has been exaggerating the actual effect on payrolls, but nevertheless is a cause for concern going forward.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. Last week the Fed’s balance sheet rose to US$2.069trn from US$2.052trn a week prior. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to helping to control interest rates.

Fed Speak: Fed Vice Chairman Donald Kohn is schedule to speak at the Brookings Institute in Washington D.C. on the Fed’s unorthodox policy response to the recent financial crisis. Dennis Lockhart, President of the Atlanta, is also scheduled to speak on Thursday.

US Treasury Secretary Timothy Geithner is scheduled to testify in front of a Congressional oversight committee regarding the Troubled Asset Relief Program (TARP).

The Bank of Canada and the ECB are scheduled to make monetary policy announcements.

Friday September 11th:

8:30AM: August Import and Export Prices (Risk: Neutral, Market Reaction: Moderate): An increment in petroleum prices during the month will likely cause August’s import price index to rise, after falling -0.7% in July. Presently, a substantial rise in any of the major pricing indicators could increase the amount of chatter over potential future inflationary pressures. For a more detailed analysis on how inflationary pressures could impact monetary policy please see my piece on FiatEconomics.com titled, ‘When Will the FOMC Turn From Dove to Hawk? Don’t Hold Your Breath…’.

9:55AM: August Preliminary Consumer Sentiment (Risk: Neutral, Market Reaction: Significant): Improvements in the housing market, fewer job losses, and relatively low gasoline prices will like place some positive momentum on September’s preliminary Reuters/University of Michigan Consumer Sentiment Index. The current Bloomberg consensus forecast for the index is 67.0, compared to August’s final reading of 64.5. As you may recall August’s preliminary release unexpectedly fell to 63.2 from 66.0 in July causing significant leading to significant concerns over the US consumer sector. August’s final reading was the lowest since March 2009. An increment in last week in the Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index should bode well for consumer sentiment as they tend the indicators tend to demonstrate a significant correlation. The RBC Cash Index increased to 40.0 in September compared to a previous reading 37.5.

10:00AM: July Wholesale Trade (Risk: Neutral, Market Reaction: Moderate): This indicator measure the level of inventories and sales by US wholesalers. It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales. However, continued weakness in the labor market coupled with no indication of a rebound in consumer spending this index could face some negative pressure. It is also important to note that this data is on a two month lag.

2:00PM: Treasury Budget (Risk: Neutral, Market Reaction: Moderate): The current Bloomberg consensus for July’s US government budget deficit is –US$140.0bn compared to –US$180.7 a month prior. Large deficits have led to record levels of US treasuries auctions, which in some instances have placed downward pressure on rates and in a few cases the growing deficit has even sparked some mild concerns over the US’s risk free credit rating.

On the economics front this week we have a rather light calendar compared to last week, but not without some significant releases. The weeks starts out slow with no noteworthy releases on Monday, followed up by productivity and costs on Tuesday. The week closes with the hard hitting trifecta of July’s CPI, June’s Industrial Production, and August’s preliminary consumer sentiment release on Friday. In the middle of the week we also have this month’s FOMC announcement, where despite early signs of a recovery, sustained weakness in the labor market makes it highly unlikely the FOMC will make any changes to its current policy stance. However, this meeting could help determine the fate of two of the Fed’s programs designed to bring liquidity back into the market; these include the TALF and treasury purchase program. After last Friday’s better than anticipate labor report, the market will again be paying close attention to Thursday’s initial jobless claims release looking for further indications that the US labor market is on the long road to recovery. We should also get a bit more insight into consumer behavior this week with the release of the wholesale trade data on Tuesday, and the much more closely watched retail sales data on Thursday. We may have a relatively quiet week in terms of volume, but this week’s calendar is more about quality versus quantity. Here is the entire calendar:

Monday August 10th:

None

Tuesday August 11th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downward, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number indicated a -0.2% decline in store sales over the previous week.

8:30AM: Productivity and Costs (Risk: Neutral, Market Reaction: Significant): Despite lay-offs and reduced capital expenditures increased productivity has been one of the few forces helping to support corporate profits. Productivity will likely remain strong in 2Q09 with the current Bloomberg consensus forecast indicating an increment of 5.5% for productivity and a decline of -2.8% for unit labor cost. The fact that during 2Q09 the market experienced a 1.6% drop in non-farm value added compared to a larger decline of 6.5% in hours work should help bolster the index.

10:00AM: Wholesale Trade (Risk: Negative, Market Reaction: Marginal): This indicator measure the level of inventories and sales by US wholesalers. This indicator is can be a good forward looking indicator toward trends in consumer behavior as stores would like to ramp up inventories prior to any anticipated increment in sales. However, continued weakness in the labor market coupled with no indication of a rebound in consumer spending this index could face some negative pressure. It is also important to note that this data is on a two month lag.

Wednesday August 12th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Last week the overall index rose 4.4%; while the refinance index rose 7.2% on the back of relatively low mortgage rates.

8:30AM: International Trade (Risk: Neutral, Market Reaction: Significant): The current Bloomberg consensus forecast for June’s US trade balance is –US$28.5bn compared to –US26.0bn a month prior. Higher energy prices should lead to an increase in the value of US imports, which should be partially offset by higher exports stemming from a weaker dollar during the month.

10:30AM: EIA Petroleum Status Report(Risk: Neutral, Market Reaction: Moderate): This report indicates domestic petroleum inventories, which could have a significant impact on the energy sector. Last week this report showed an increase of inventories of 1.7mn barrels after rising 5.2mn a week prior. Please see this brief discussion piece on FiatEconomics.com describing the potential effect of inventories on long-term oil prices.

2:00PM: Treasury Budget (Risk: Neutral, Market Reaction: Moderate): The current Bloomberg consensus for July’s US government budget deficit is –US$180.0bn compared to –US$94.3bn a month prior. Large deficits have led to record levels of US treasuries auctions, which in some instances have placed downward pressure on rates and in a few cases the growing deficit has even sparked some mild concerns over the US’s risk free credit rating.

2:15PM: FOMC Announcement (Risk: Neutral, Market Reaction: Significant): Despite early signs of an economic recovery, weakness in the labor market makes it highly unlikely the FOMC will make any changes to current monetary policy. But, it will be important to watch for any changes in the FOMC statement indicating a potential shift in the Fed’s bias. The primary issue at this meeting will be whether or not to extend the Feds Term Asset Backed Securities Loan Facility (TALF), which was designed to help bolster consumer and business lending markets. But, some market participants have been critical on this program’s effectiveness. There will likely also be some discussion over whether or not to continue a program to purchase long and medium-term treasuries set to expire in September.

Thursday August 13th:

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell 34K to 550K last week as it seems all of the effects from the erroneous seasonal adjustment factors seems to be washed out. Claims should continue to improve as the month’s progress, but likely won’t reach comfortable levels until next year. The current Bloomberg consensus for this week’s initial claims number is 543K.

8:30AM: Retail Sales (Risk: Neutral, Market Reaction: Significant): Excluding auto sales, which have risen quite sharply due to the government’s ‘cash for clunkers’ initiative, retail sales should finish the month relatively weak. The current Bloomberg consensus for July’s retail sales is +0.8%, however, this number includes auto sales. Ex-autos the number stands at +0.1%, and this could face some negative pressure. Continued weakness in the labor market combined with what is likely to be a lackluster back to school season will continue to depress this index. In fact, a recent survey by the National Retail Federation found that families this year will be spending on average US$549 versus US$594 last year on back to school goods.

8:30AM: Import and Export Prices (Risk: Neutral, Market Reaction: Marginal): Energy prices declined in July, which will likely place some downward pressure on the import price index. But, this effect could be at least partially offset by price increases for industrial equipment and food. Overall this index will likely show a modest decline for the month.

10:00AM: Business Inventories (Risk: Neutral, Market Reaction: Moderate): June’s business inventories will probably continue to fall, albeit at a slower pace. The current Bloomberg consensus forecast for the index is a decline of -0.8%. This is on the back of a drop of -0.8% for factory inventories during the same month. This would be the 10th straight month business inventories have fallen. The good news is that at some point inventories will need to be replenished, which could eventually generate a spike in manufacturing.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. Last week the Fed’s balance sheet moved back below continued to decline falling to US$1.974trn from US$1.985trn a week prior. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to helping to control interest rates.

Friday August 14th:

8:30AM: Consumer Price Index (Risk: Neutral, Market Reaction: Significant): As with the import price index, a decline in energy prices partially offset by higher food prices probably helped to reduce pricing pressure for July’s headline CPI. But, we should see a slightly higher gain in the core CPI number given price pressure from a number of goods including automobiles. The current Bloomberg consensus forecast is for a CPI and Core CPI of 0.1% and 0.2%, respectively.

9:15AM: Industrial Production (Risk: Neutral, Market Reaction: Very Significant): Increased motor vehicle production should help support June’s industrial production number, which could also face some negative pressure from continued weakness in the mining sector. The current Bloomberg consensus forecast for June’s IP is a gain 0.6%.

10:00AM: Consumer Sentiment (Risk: Neutral, Market Reaction: Significant): Slight improvements in job losses experienced over the last several weeks combined with rising equity markets should lead to a marginally higher outcome to Augusts’ preliminary consumer sentiment index. The current Bloomberg consensus forecast for this release is 68.5 compared to a previous reading of 66.0.

This week’s economic calendar is relatively quiet, especially compared to the hustle and bustle of last week.Monday’s non-manufacturing ISM report starts the week off, followed by Wednesday’s consumer credit report, Thursday’s jobless claims data, and Friday’s US trade statistics and consumer sentiment.The impact of this week’s non-manufacturing ISM report could be somewhat subdued since its release comes after June’s employment report; negating the importance the report’s employment index.But, significant declines or advances in the report’s business activity index could help shift market sentiment.This week’s big headlines, however, will likely be driven by the start of the 2Q09 earnings seasons, with Alcoa set to announce earnings on Wednesday.There is also a G8 summit taking place this week in Italy, which could produce some headlines.Here is this week’s US economic calendar:

Monday July 6th:

10:00AM: ISM non-manufacturing Index (Risk: Neutral, Market Reaction: Moderate/Marginal): The non-manufacturing ISM index will likely experience its third consecutive monthly rise.The current Bloomberg consensus for the index is 46.7 compared to last month’s reading of 44.0.The market would take any positive surprises to this index as good news echoing better than anticipated data in the manufacturing sector pointing towards a less severe recession.It will also be important to pay attention to non-manuf. ISM’s new order index, which tends to be a forward looking indicator for the primary business activity index.Since June’s employment report has already been released the employment index is essentially a non-factor.

Tuesday July 7th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downside, Market Reaction: Marginal): This weekly index tracks same store sales at major US retailers, account for roughly 10% of total sales.Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.Last week’s number indicated a 1.6% increment in store sales over the previous week.

Wednesday July 8th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.A recent drop in refinancing activity caused this index to drop 18.9% on a weekly basis last week, while the level of mortgages to purchase new homes dropped by 4.5%.

3:00PM: Consumer Credit (Risk: Downside, Market Reaction: Marginal): Consumer credit has contracted quite severely over the past several months as saving rates rise and banks tighten consumer credit.The current Bloomberg consensus indicates a month over month change of –US$7.5bn compared to –US$15.7bn a month prior—the second biggest drop on record.Given recent deterioration in the employment situation and a drop in consumer confidence we could see this indicator disappoint.

Thursday July 9th:

Same Store Sales: (Risk: Downside, Market Reaction: Moderate): This monthly release breaks out same store sales data for individual retail chains.Like weekly the ICSC-Goldman Store Sales index, recent data supporting an increasing US savings rate and a worsening employment situation coupled with deep discounts at some stores, will likely place some downward pressure on same store sales.

8:30AM: Initial Claims (Risk: Neutral, Market Reaction: Significant):The current Bloomberg consensus forecast for initial claims is 610K versus last week’s number of 614K.It is likely that after Thursday’s disappointing employment data the market will become more sensitive to changes in claims, as it is an excellent forward looking indicator toward payroll data. I anticipate both initial and continuing claims data will improve as the month progresses.

Friday July 10th:

8:30AM: International Trade (Risk: Neutral, Market Reaction: Marginal/Moderate):The current Bloomberg consensus for the US trade balance is –US$28.8bn versus last month’s reading of –US$29.2bn.Recent increments in oil prices could add to the current deficit, while placing upward pressure on the import price index.

9:55AM: Consumer Sentiment (Risk: Neutral, Market Reaction: Marginal/Moderate):The current consensus on Bloomberg for the Reuters/University of Michigan Consumer Sentiment Index stands at 71.5 versus last month’s result of 70.8. The sentiment index is broken up into two parts, current conditions and future expectations.Investors are likely to focus more on this report after last week’s disappointing consumer confidence number. A positive or negative surprise in this index could impact the day’s trading.

10:00AM: Treasury SecretaryTim Geithner: Is set to testify before the House Financial Services and Agriculture Committees on derivatives regulation.This could create some headlines.

Contact Me:

Michael.McDonough@fiateconomics.com
Michael is an economist/strategist who has worked from Wall Street to Hong Kong primarily focusing on the U.S. and emerging markets. He has also written several columns. More

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